recommendations for insureds hoping to avoid insurer
litigation or failing that, manage such cases more deftly.
One basic step risk managers should take is,
prior to policy issuance or during annual meetings
with underwriters, make sure any attorney you
plan to use is on your insurers’ approved list in case
litigation arises, Andrews said.
“One good rule of thumb is to anticipate that
litigation will arise under most policies,” said Andrews.
“Not having your preferred attorney or law firm
on the insurer’s ‘panel counsel’ list is a source of
litigation in and of itself and can really prejudice the
effective management of the litigation,” he said.
In addition to tightening the connection with
insurers, risk managers should also ask to select
the independent adjuster who will work on their
account, said John Dempsey, managing director and
practice leader, claims preparation, advocacy and
valuations at Aon Global Risk Consulting.
BUSINESS INTERRUPTION DISCONNECT
Dempsey said there have been some real changes
occurring in the property-catastrophe sector of late,
in terms of how business interruption (BI) risks are
For example, when a law firm noticed its billable
hours fell following Superstorm Sandy and tried
to collect under its BI policy, the lead insurer on
the program interpreted the coverage clause in a
somewhat novel way.
“The insurer said, ‘Let’s look at each lawyer [at
the firm] and whether the reduced billings were the
result of physical damage to the law firm’s property,
or other causes such as trees blocking their
driveways, gas shortages, or time spent repairing
their damaged houses,’ ” Dempsey said.
“If other ‘causes’ were found, the business
income claim was reduced, accordingly. Yet, all of
these causes were inextricably linked to Sandy and
its effects. There’s a disconnect here,” he said.
Clearly, that storm helped to illustrate that
insurance products have not kept up with the
changing risks companies are facing, he said.
For one thing, because coastal flooding caused
significant damage, it was important to know whether
that peril was classified as “flood” or “storm surge”
under the policy. In some cases, insureds without
adequate flood coverage were out of luck, he said.
Furthermore, whereas many businesses did not
suffer direct property damage, which is generally
required for the recovery of business interruption
losses, the wider effects of Sandy meant that
thousands of employees had trouble getting to
work due to infrastructure damage in the storm’s
Others suffered losses because financial
institutions closed down for two days.
The result: Although many businesses sustained
Sandy-related financial losses, without direct
physical damage to trigger coverage, many insureds
found they lacked protection under their property
That has led some underwriters to urge risk
managers to lower their claim recovery expectations.
“They do not wish to insure all of the things that
could go wrong following a natural catastrophe like
Superstorm Sandy or a terrorist event like 9/11,”
After 23 years managing risk at a company with a
product line that includes respirators that protect
workers from toxins created during sandblasting,
Roger Andrews has learned a thing or two about
As director of risk management for personal
protective equipment maker E.D. Bullard Co.,
Andrews has handled thousands of lawsuits over the
years, including those stemming from occupational
disease claims in which plaintiffs have sought
damages for asbestosis and silicosis — diseases that
may be contracted 10 to 15 years or more before
any symptoms or actual claims arise.
Some cases have emerged because workers used
Bullard’s safety gear sporadically or not at all.
Whatever the merits of the underlying cases,
it’s no surprise that historically such lawsuits have
led insurers to balk at supplying policyholders with
indemnification or defense. Clearly, the long-tail
nature of occupational disease claims has led to
disputes over items including applicable coverage
triggers, policy duration, and sufficient notifications
(or the lack thereof).
Nevertheless, Andrews said it is rare now that he
faces conflicts with insurers, and that is largely due
to ongoing relationship-building efforts to ensure he
and his underwriters and claims adjusters are on
the same page.
Andrews has worked with some carriers for
18 years. “It still makes sense to meet with them
regularly once a year, usually in August just prior to
our October renewals,” Andrews said, “just to get a
feel for the marketplace, any rate increases, and what
the situation is if we encountered any unique risks.
“It may be that we haven’t seen any claims or that
we’ve seen lots of claims, and we’d talk through that.”
Industry attorney Ty Childress, a partner and
head of the insurance recovery group at Jones
Day in Los Angeles, said there are numerous
cases where insurers are apt to deny claims —
particularly when the stakes are high and large
dollar amounts are at issue.
Such claims include “asbestos and environmental
exposures covering multiple policy years,” he said.
Nor are the problems confined to liability
insurance, Childress said, noting that the nature
of business interruption can also make claims
valuation difficult and subject to differing views from
legal and insurance experts.
So, what are risk managers to do? Attorneys,
brokers and other risk experts have several
Complex claims — old and new — call for relationship-building to
minimize surprises. BY JANET ASCHKENASY
RISK & INSURANCE®
• Insurance claims challenges are becoming more
• Expensive claims covering multiple policy years are
• Good relationships and communication with
underwriters can head off problems.
BUILDING RELATIONSHIPS with underwriters and adjusters can help prevent claims disputes.
OCTOBER 15, 2014